Never miss a story from David Song

Subscribe to recieve updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to David Song

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

USDJPY CHART

Fundamental Forecast for Japanese Yen: Bullish

Japanese Yen Talking Points

USD/JPY struggles to hold its ground following the U.S. Non-Farm Payrolls (NFP) report as the updates highlight a slowdown job growth, and another batch of lackluster data prints may trigger a further depreciation in the exchange rate as the Consumer Price Index (CPI) is expected to narrow to 2.2% from 2.5% in October.

The 155K expansion in U.S. employment remains a far cry from figures seen during a recession, but the steady 3.1% print for Average Hourly Earnings does little to boost the outlook for demand-pull inflation especially as the updates to the U. of Michigan Confidence survey show 12-month inflation expectations easing to 2.7% from 2.8% in November.

Atlanda Fed GDPNow

In response, the Atlanta Fed GDPNow model now forecasts the U.S. economy to grow 2.4% per annum in the fourth-quarter of 2018 versus 2.7% on December 6, and signs of slower growth may push the Federal Open Market Committee (FOMC) to deliver a dovish rate-hike later this month as officials see a limited risk for above-target inflation.

Recent comments from Vice-Chairman Richard Clarida suggest the central bank is nearing the end of the hiking-cycle as Fed officials ‘are focused on keeping inflation away from disinflation,’ and an uptick in the core CPI may start to undermine the outlook for private-sector consumption as households face higher borrowing-costs paired with limited wage growth.

Fed Interest Rate Forecast

With that said, Chairman Jerome Powell & Co. may continue to project a neutral interest rate of 2.75% to 3.00% as the shift in U.S. trade policy boosts import prices, but the central bank may start to alter its tune over the coming months in response to signs of a slowing economy.

As a result,the October range remains in focus ahead of the Fed interest rate decision on December 19, with USD/JPY at risk for further losses as the exchange rate marks another failed attempt to test the 2018-high (114.55). Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups!

USD/JPY Daily Chart

USDJPY Daily Chart

The advance from the October-low (111.38) may continue to unravel as the exchange carves a series of lower highs during the first full-week of December, but need a break/close below the 112.40 (61.8% retracement) to 113.00 (38.2% expansion) region to open up the Fibonacci overlap around 111.10 (61.8% expansion) to 111.80 (23.6% expansion).

Keep in mind, the Relative Strength Index (RSI) warns of range-bound conditions as it appears to be stuck in a triangle/wedge formation, but the oscillator may ultimately flash bearish signal over the coming days as it quickly approaches trendline support.

For more in-depth analysis, check out the Q4 Forecast for Japanese Yen

--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.